For a diplomatic view of what Doerr and Wilson said, mostly by an 'idea' they mean some nearly instant guess at a one sentence description of what would make a good description of a product or service to a customer, and the hope is that the business would be good.
Of course, still these venture partners are being silly: The product or service selected to sell to customers is crucial. Broadly, many products and services can be offered that essentially no customers would want even for free. And there are products and services that many customers would want, but the price would have to be too high. And there can be other problems with the product or service envisioned.
Then there's the claim that execution is so difficult: Obviously this is nearly total nonsense as anyone in the US can easily see. E.g., the US is just awash in businesses, millions of them, supporting families, coast to coast, on Main Street in villages, towns, cities. These businesses sell carryout pizza, repair roofs, mow grass, pour concrete, install or repair plumbing or HVAC, maintain cars, do auto body repair, buy products at a low price per unit in large quantities and sell them at a higher price per unit in smaller quantities (per sale), and on and on. E.g., look at the businesses on the TV program 'Diners, Drive-ins, and Dives' and identify the 'exceptional' abilities in "execution" they have mastered?
From living in several major parts of the US, I have yet to see such a US Main Street where the rate of business turnovers was high or where most new businesses start and fail quickly. So the failure rate has to be fairly low. If execution were so difficult, then the failure rate of these Main Street businesses would be much higher.
Why venture partners are so consistent in getting these issues of Business 101 wrong is curious, frustrating, and disconcerting.
Here is a much better description of what is true: Bad ideas for products and services are easy, and then execution is difficult. Good ideas for new products and services are difficult, and then execution is routine. As Main Street shows, the US is just awash in the ability to do routine execution well.
Then also Kumar misses a crucial point for a business based on a new product or service. So, he writes:
"In fact, most founders tend to take it to the other extreme that they don’t want to share their idea (subject of another future blog post on why Stealth is Overrated)."
So all he sees for an 'idea' is just the description of the product or service. Wildly wrong.
There is a much older, and much more appropriate, description of how to start a successful business with something new:
(1) Problem Idea.
Pick a good problem to solve. To have a really successful business, the problem has to be 'big' enough, e.g., with a few customers ready to pay a lot or a lot of customers willing to pay at least a little.
IBM picked using punched cards from Hollerith to replace huge rooms of clerks doing routine business record keeping.
Xerox picked office photocopying.
Ford picked a car for everyman for a few hundred dollars.
DEC picked small computers for scientists and engineers.
FedEx picked overnight delivery of small packages with excellent package tracking.
Wal-Mart picked big box general store retailing with excellent buying and logistics and locations in smaller communities.
Google picked Internet search based on keywords much like an old library card catalog subject index but aided with 'page rank' as a measure of popularity.
(2) Newness Idea.
Main Street businesses often do well enough without much attention to newness because they can have a 'geographical barrier to entry' and, thus, no competition more than 50 miles away. So do well against competition in a radius of 50 miles and do okay.
Without a geographical barrier to entry, to help avoid competition, it is important to have something new about the business that helps revenue and/or earnings, and this something new should be difficult to duplicate or equal.
For IBM, its punched cards were new. Then IBM did exceptionally well with product quality and customer service.
For Xerox, the electromechanical internals of their machines were new.
For FedEx, they used the CAB regulation for unscheduled air taxi to be the only nationwide company both to operate trucks and fly airplanes and, thus, have full control over the packages from origin to destination and excellent ability to track the packages.
DEC did well with the new technology of printed circuits with discrete components.
(2) Solution Idea.
One source of something new is the solution, that is, the means of supplying the product or service.
If the problem to be solved is really big but not yet well solved, then likely plenty of people have seen the problem but have not been able to find an effective solution.
In now very old terms, the solution might be something that deserves a patent (Xerox) or that should be protected as a trade secret (Google). The solution might be the main source of newness for the business.
Here is the big, HUGE mistake of information technology venture capital: The assumption is that the core technology is just routine software with nothing new that is difficult to duplicate or equal. That is, the technology has no significant 'ideas'.
Instead, the core technology might have solid, new, powerful, valuable 'ideas'. Various parts of our society -- DoD, NSF, NIH, biotech venture capital, the patent system, etc. -- recognize the importance of such ideas, but information technology venture capital, with outrageous hostility, rejects any such possibilities.
The nonsense is too uniform to be just 'natural'. Instead it appears that some LPs had lunch and decided to take a preemptive negotiating position to deprecate to worthlessness anything new from entrepreneurs in information technology.
Here's some of where such venture capital is making a mistake:
(1) New Ideas.
The US research universities remain crown jewels of civilization, and the leading graduate programs provide excellent starts in how to find powerful, valuable new ideas. Indeed, the common criterion for a Ph.D. is some original research worthy of publication, and the usual criteria for publication are new, correct, and significant.
The power of such research has been well appreciated by the US DoD for about 70 years and by the US NIH for nearly that long.
For US information technology venture capital to ignore or deprecate the power and value of such research will have to prove to be a long walk on a short pier.
(2) Solving a Big Problem.
Such new ideas can be the crucial, core 'secret sauce' that is difficult to duplicate or equal and that permits solving a big problem.
(3) Starting a Web Based Business.
Now it costs less in capital equipment to start a new Web based business than a carry out pizza shop, grass mowing service, auto repair shop, auto body shop, etc. These old Main Street businesses essentially never get equity funding, and it's getting to be a strain just why new Web based businesses should seek equity funding.
(4) Execution.
For a new Web based business with a few servers in a spare room, small commercial space, or colocation site, the challenge of execution stands to be less than for most Main Street businesses. Or, if Main Street can do the execution, then a researcher with a powerful, valuable new idea and a Web based business should be able to also.
So, for the entrepreneur, the opportunity is:
(1) Pick a big problem not solved well.
(2) Do some original research and find better means of solving that problem. The research is the main 'idea' and should be difficult to duplicate or equal and protected as a trade secret. That all such ideas are "easy", "plentiful", and "worthless" is insulting, brain-dead, absurd, and outrageous. Nor will such ideas be found by 'pivoting' during 'execution'.
(3) Implement the research in software and run it on servers in a Web based business.
(4) Bring up the Web site, go live, get users, run ads, get ad revenue, and have a business.
For a Series A round, those venture partners will want the business to have so much 'traction' that is already is or soon will be throwing off cash enough to let the entrepreneur grow the business quickly and have a nice living.
E.g., maybe early on the Web site sends 10 Web pages a second, 24 x 7, with three ads per page and with good enough ad targeting for $1 in ad revenue per 1000 ads displayed. Then the revenue in a 30 day month would be:
1 * 3 * 10 * 3600 * 24 * 30 / 1000 = 77,760
dollars. So, the entrepreneur is already doing as well as a Main Street entrepreneur with several carry out pizza shops.
For such an entrepreneur, just why would they want to report to a board of directors with venture partners who just ignore the potential of new ideas from research and generally insist that ideas are "easy", "plentiful", and "worthless" and that execution, done well enough by millions of US Main Street entrepreneurs, is "everything"?
Net, the flip side of this outrageous information technology venture partner brain-dead, deprecating, insulting nonsense is one heck of a collection of good business opportunities.
This incongruous situation is close to inevitable: Really sweet business opportunities can be there only if they are not easy to see. Apparently it is overwhelmingly attractive just to wallow in the nonsense that ideas are easy and execution everything.
Not really: The contempt for ideas among venture partners is overwhelming. E.g., KPCB VC Doerr at
http://www.youtube.com/v/nBvuirDPHKA&hl=en_US
claimed that "Ideas are easy" and "plentiful" and "Execution is everything.". Union Square VC Wilson at
http://www.avc.com/a_vc/2011/04/how-to-allocate-founder-and-...
said "Ideas are pretty much worthless.".
For a diplomatic view of what Doerr and Wilson said, mostly by an 'idea' they mean some nearly instant guess at a one sentence description of what would make a good description of a product or service to a customer, and the hope is that the business would be good.
Of course, still these venture partners are being silly: The product or service selected to sell to customers is crucial. Broadly, many products and services can be offered that essentially no customers would want even for free. And there are products and services that many customers would want, but the price would have to be too high. And there can be other problems with the product or service envisioned.
Then there's the claim that execution is so difficult: Obviously this is nearly total nonsense as anyone in the US can easily see. E.g., the US is just awash in businesses, millions of them, supporting families, coast to coast, on Main Street in villages, towns, cities. These businesses sell carryout pizza, repair roofs, mow grass, pour concrete, install or repair plumbing or HVAC, maintain cars, do auto body repair, buy products at a low price per unit in large quantities and sell them at a higher price per unit in smaller quantities (per sale), and on and on. E.g., look at the businesses on the TV program 'Diners, Drive-ins, and Dives' and identify the 'exceptional' abilities in "execution" they have mastered?
From living in several major parts of the US, I have yet to see such a US Main Street where the rate of business turnovers was high or where most new businesses start and fail quickly. So the failure rate has to be fairly low. If execution were so difficult, then the failure rate of these Main Street businesses would be much higher.
Why venture partners are so consistent in getting these issues of Business 101 wrong is curious, frustrating, and disconcerting.
Here is a much better description of what is true: Bad ideas for products and services are easy, and then execution is difficult. Good ideas for new products and services are difficult, and then execution is routine. As Main Street shows, the US is just awash in the ability to do routine execution well.
Then also Kumar misses a crucial point for a business based on a new product or service. So, he writes:
"In fact, most founders tend to take it to the other extreme that they don’t want to share their idea (subject of another future blog post on why Stealth is Overrated)."
So all he sees for an 'idea' is just the description of the product or service. Wildly wrong.
There is a much older, and much more appropriate, description of how to start a successful business with something new:
(1) Problem Idea.
Pick a good problem to solve. To have a really successful business, the problem has to be 'big' enough, e.g., with a few customers ready to pay a lot or a lot of customers willing to pay at least a little.
IBM picked using punched cards from Hollerith to replace huge rooms of clerks doing routine business record keeping.
Xerox picked office photocopying.
Ford picked a car for everyman for a few hundred dollars.
DEC picked small computers for scientists and engineers.
FedEx picked overnight delivery of small packages with excellent package tracking.
Wal-Mart picked big box general store retailing with excellent buying and logistics and locations in smaller communities.
Google picked Internet search based on keywords much like an old library card catalog subject index but aided with 'page rank' as a measure of popularity.
(2) Newness Idea.
Main Street businesses often do well enough without much attention to newness because they can have a 'geographical barrier to entry' and, thus, no competition more than 50 miles away. So do well against competition in a radius of 50 miles and do okay.
Without a geographical barrier to entry, to help avoid competition, it is important to have something new about the business that helps revenue and/or earnings, and this something new should be difficult to duplicate or equal.
For IBM, its punched cards were new. Then IBM did exceptionally well with product quality and customer service.
For Xerox, the electromechanical internals of their machines were new.
For FedEx, they used the CAB regulation for unscheduled air taxi to be the only nationwide company both to operate trucks and fly airplanes and, thus, have full control over the packages from origin to destination and excellent ability to track the packages.
DEC did well with the new technology of printed circuits with discrete components.
(2) Solution Idea.
One source of something new is the solution, that is, the means of supplying the product or service.
If the problem to be solved is really big but not yet well solved, then likely plenty of people have seen the problem but have not been able to find an effective solution.
In now very old terms, the solution might be something that deserves a patent (Xerox) or that should be protected as a trade secret (Google). The solution might be the main source of newness for the business.
Here is the big, HUGE mistake of information technology venture capital: The assumption is that the core technology is just routine software with nothing new that is difficult to duplicate or equal. That is, the technology has no significant 'ideas'.
Instead, the core technology might have solid, new, powerful, valuable 'ideas'. Various parts of our society -- DoD, NSF, NIH, biotech venture capital, the patent system, etc. -- recognize the importance of such ideas, but information technology venture capital, with outrageous hostility, rejects any such possibilities.
The nonsense is too uniform to be just 'natural'. Instead it appears that some LPs had lunch and decided to take a preemptive negotiating position to deprecate to worthlessness anything new from entrepreneurs in information technology.
Here's some of where such venture capital is making a mistake:
(1) New Ideas.
The US research universities remain crown jewels of civilization, and the leading graduate programs provide excellent starts in how to find powerful, valuable new ideas. Indeed, the common criterion for a Ph.D. is some original research worthy of publication, and the usual criteria for publication are new, correct, and significant.
The power of such research has been well appreciated by the US DoD for about 70 years and by the US NIH for nearly that long.
For US information technology venture capital to ignore or deprecate the power and value of such research will have to prove to be a long walk on a short pier.
(2) Solving a Big Problem.
Such new ideas can be the crucial, core 'secret sauce' that is difficult to duplicate or equal and that permits solving a big problem.
(3) Starting a Web Based Business.
Now it costs less in capital equipment to start a new Web based business than a carry out pizza shop, grass mowing service, auto repair shop, auto body shop, etc. These old Main Street businesses essentially never get equity funding, and it's getting to be a strain just why new Web based businesses should seek equity funding.
(4) Execution.
For a new Web based business with a few servers in a spare room, small commercial space, or colocation site, the challenge of execution stands to be less than for most Main Street businesses. Or, if Main Street can do the execution, then a researcher with a powerful, valuable new idea and a Web based business should be able to also.
So, for the entrepreneur, the opportunity is:
(1) Pick a big problem not solved well.
(2) Do some original research and find better means of solving that problem. The research is the main 'idea' and should be difficult to duplicate or equal and protected as a trade secret. That all such ideas are "easy", "plentiful", and "worthless" is insulting, brain-dead, absurd, and outrageous. Nor will such ideas be found by 'pivoting' during 'execution'.
(3) Implement the research in software and run it on servers in a Web based business.
(4) Bring up the Web site, go live, get users, run ads, get ad revenue, and have a business.
For a Series A round, those venture partners will want the business to have so much 'traction' that is already is or soon will be throwing off cash enough to let the entrepreneur grow the business quickly and have a nice living.
E.g., maybe early on the Web site sends 10 Web pages a second, 24 x 7, with three ads per page and with good enough ad targeting for $1 in ad revenue per 1000 ads displayed. Then the revenue in a 30 day month would be:
1 * 3 * 10 * 3600 * 24 * 30 / 1000 = 77,760
dollars. So, the entrepreneur is already doing as well as a Main Street entrepreneur with several carry out pizza shops.
For such an entrepreneur, just why would they want to report to a board of directors with venture partners who just ignore the potential of new ideas from research and generally insist that ideas are "easy", "plentiful", and "worthless" and that execution, done well enough by millions of US Main Street entrepreneurs, is "everything"?
Net, the flip side of this outrageous information technology venture partner brain-dead, deprecating, insulting nonsense is one heck of a collection of good business opportunities.
This incongruous situation is close to inevitable: Really sweet business opportunities can be there only if they are not easy to see. Apparently it is overwhelmingly attractive just to wallow in the nonsense that ideas are easy and execution everything.